Feb. 23 (Bloomberg) -- Oil dropped from a nine-month high
in New York after a report showed stockpiles increased in the
U.S., the world’s biggest consumer of crude.

Futures slid as much as 0.5 percent and were headed for the
first decline in more than a week. U.S. inventories rose by 3.55
million barrels, the American Petroleum Institute said. A
government report today may show they gained by 1.35 million
barrels, according to a Bloomberg News survey of analysts.
Crude’s relative strength index climbed above 70 yesterday, a
sign prices may have risen too fast. The U.S. criticized the
refusal of Iran, OPEC’s second-biggest crude producer, to let
United Nations inspectors access a suspected nuclear base.

“Oil and gas demand in the U.S. has been muted for some
time,” said David Lennox, an analyst at Fat Prophets in Sydney.
The increase in New York crude “from $90 to where it sits now
is probably supply-shock potential,” he said.

Crude for April delivery fell as much as 56 cents to
$105.72 a barrel in electronic trading on the New York
Mercantile Exchange and was at $106.19 at 4:14 p.m. Singapore
time. The contract rose yesterday to $106.28, the highest close
since May 4. Oil is up 2.9 percent this week on speculation that
tensions with Iran over its nuclear program will threaten
supplies. Prices are 8.3 percent higher in the past year.

Brent oil for April settlement was at $122.95 a barrel, up
5 cents, on the London-based ICE Futures Europe exchange. The
European benchmark contract’s premium to New York-traded West
Texas Intermediate was at $16.76. It reached a record of $27.88
on Oct. 14.

Fuel Stockpiles

Gasoline supplies rose 314,000 barrels last week, figures
from the industry-funded API showed. They are projected to
increase 250,000 barrels in the Energy Department report,
according to the median of 10 analyst estimates in the survey.
Distillate inventories, a category that includes diesel and
heating oil, gained 630,000 barrels compared with a forecast for
a 1.5 million barrel decline.

The survey also estimated that refineries operated at 83.5
percent of capacity in the seven days ended Feb. 17, down 0.5
percentage point from the prior week’s one-month high.

The Energy Department is scheduled to release its weekly
report at 11 a.m. today in Washington, a day later than usual
because the government and financial markets were closed for the
Presidents’ Day holiday. The API collects stockpile information
on a voluntary basis from operators of refineries, bulk
terminals and pipelines and files the reports with the
government for the report.

Relative Strength

Oil’s advance in New York is stalling after the 14-day
relative strength index climbed above 70 yesterday for the first
time since Nov. 16, according to data compiled by Bloomberg.
This indicates futures have risen too quickly and further gains
aren’t sustainable. Investors tend to sell contracts when prices
are considered overbought. Today’s reading is about 68.4.

Goldman Sachs Group Inc. recommended buying September crude
futures on the Nymex on speculation supplies will tighten after
the reversal of the Seaway pipeline in June, according to a
weekly report emailed today.

The 500-mile (800-kilometer) Enterprise Products Partners
LP and Enbridge Inc. pipeline will allow oil from the
Midcontinent to reach the Gulf of Mexico for export. Goldman
closed a buy recommendation for July Brent futures in London, it
said.

Iran’s Nuclear Program

National Australia Bank Ltd. raised its oil forecasts for
the first quarter of 2012, saying tension over Iran’s nuclear
program has added to supply outages in South Sudan and the North
Sea, according to a Feb. 20 report. West Texas Intermediate
crude will average $100 a barrel in New York this quarter, up $1
from the bank’s previous forecast in January. Brent will average
$113 instead of $108.

Prices advanced yesterday after officials from the
International Atomic Energy Agency were denied access to an
Iranian military base. The U.S. and Israel haven’t ruled out air
strikes against Iran’s nuclear facilities, escalating tensions
in a region that’s home to 54 percent of global oil reserves.

Iran’s refusal to allow access to sites where Western
intelligence agencies have reported suspected nuclear weapons
work is “another demonstration of Iran’s refusal to abide by
its international obligations,” White House spokesman Jay
Carney said yesterday.

Iran produced 3.5 million barrels of oil a day last month,
according to analysts’ estimates compiled by Bloomberg. Saudi
Arabia, the biggest member in the Organization of Petroleum
Exporting Countries, had output of 9.7 million barrels a day.